MOUSTAFA TORKY v. ADVANCED TAXATION PRACTICE LLC AHMAD SEYAM ABDELRAFEA SALAMA (2026)

MEMORANDUM AND ORDER

Plaintiff Moustafa Torky brings this action against Defendants Advanced Taxation Practice, LLC (“Advanced Taxation”), Ahmad E. Seyam (“Seyam”) and Abdelrafea Salama (“Salama”) (collectively, “Defendants”), asserting New York state law claims for fraud and breach of contract arising out of Advanced Taxation and Seyam's actions that allegedly caused the deposit of Plaintiff's unemployment insurance benefits into Salama's bank account rather than Plaintiff's bank account in June 2020. Dkt. No. 15 ¶¶ 9-11, 18-33. Plaintiff asserts that this Court has subject matter jurisdiction based on diversity of citizenship pursuant to 28 U.S.C. § 1332. Id. ¶ 2.

Before the Court is Defendants’ motion to dismiss for failure to state a claim, lack of subject matter jurisdiction, and sanctions.¹ Dkt. No. 27. For the reasons set forth below, the Court grants Defendants’ motion to dismiss for lack of subject matter jurisdiction, but denies without prejudice Defendants’ motion to dismiss for failure to state a claim and Defendants’ motion for sanctions.

I. Relevant Background

A. Factual Background

The Amended Complaint alleges that Plaintiff is a North Carolina resident; that Seyam and Salama are New York residents; and that Advanced Taxation has its “principal place of business located in Queens, New York.” Dkt. No. 15 ¶¶ 5-8. The Amended Complaint does not explicitly assert the citizenship of Plaintiff or any of the Defendants.

Plaintiff retained Advanced Taxation, and its principal owner and manager, Seyam, for professional accounting services. Id. ¶ 9. In June 2020, Plaintiff was eligible to receive unemployment insurance benefits from New York State. Id. ¶ 10. In the same month, New York State issued eight unemployment benefit payments to Plaintiff, totaling $3,128.00. Id. ¶ 11. Advanced Taxation and Seyam allegedly “fraudulently and surreptitiously placed false information on Plaintiff's unemployment insurance benefits application,” which caused the New York State Department of Labor to deposit the benefits into a bank account owned by Salama, another client of Advanced Taxation. Id. ¶ 12.

After Plaintiff discovered the activity, Plaintiff “demanded full restitution” of the benefits. Id. ¶ 13. According to Plaintiff, “[r]ather than provide such restitution, [Advanced Taxation Practice and Seyam] instead presented Plaintiff with a letter,” which Plaintiff styles as the “Cover-Up Letter,” “whereby they sought to have Plaintiff agree to a written version of events that was not only false but also designated to absolve [Advanced Taxation and Seyam], particularly [Salama], of responsibility for the fact that they purposely misdirected the Unemployment Benefit Funds.” Id. ¶ 14. In sum, Plaintiff alleges that Defendants Advanced Taxation and Seyam “tried to cover up their misconduct by means of the Cover-Up Letter.” Id. ¶ 15.

Plaintiff did not sign the “Cover-up Letter.” Id. ¶ 16. Plaintiff alleges that none of the Defendants repaid the unemployment insurance benefits. Id. ¶ 17. The Amended Complaint seeks compensatory and punitive damages, attorneys’ fees and costs, and any other “just and proper” relief. Id. at 7.²

Advanced Taxation and Seyam argue that the incident arose out of an “inadvertent data entry mistake” because “15 of the 19 total digits” of Plaintiff and Salama's bank accounts were identical, and what arose out of a “simple mistake” evolved into a “manufactured grievance.” Dkt. No. 27-17 at 8-9. According to Defendants, in December 2020, “the New York State Department of Labor sent plaintiff a letter ․ explaining exactly what had occurred and providing specific instructions for recovering the misdirected funds.” Dkt. No. 27-1 ¶ 18; see also Dkt. No. 27-17 at 9. Further, “on or about March 16, 2021, upon information and belief, the Department of Labor withdrew the funds directly from [Salama's] bank account.” Dkt. No. 27-2 ¶ 17; Dkt. No. 27-19 at 3.

Plaintiff counters that the Amended Complaint contains “unsettled factual disputes which can only be resolved by a jury at trial.” Dkt. No. 28-4 at 4. These “unsettled factual disputes” are: whether “Seyam Purposefully and Deceptively Present[ed] Salama's Account as Plaintiff's Account to the New York State Department of Labor”; whether “Salama Conspire[d] with Seyam to Defraud Plaintiff”; “[w]hen Did Seyam Realize That Funds Belonging to Plaintiff Were Deposited Into Salama's Bank Account”; “[w]hen Did Salama Learn That Funds Belonging to Plaintiff Were Deposited Into Salama's Bank Account”; and whether “Salama T[ook] Any Action In Furtherance Of A Conspiracy With Seyam.” Id. at 5-9.

B. Procedural History

On June 16, 2025, Plaintiff filed the Complaint, which asserted claims of fraud, conversion, identity theft, breach of fiduciary duty, accounting malpractice, and unjust enrichment. Dkt. No. 1. On June 19, 2025, Defendants waived service of process. Dkt. No. 6. On September 5, 2025, Plaintiff filed the operative Amended Complaint, which asserts only claims for fraud and breach of contract.³ Dkt. No. 15.

On October 3, 2025, Defendants filed a premotion conference request in anticipation of their motion to dismiss. Dkt. No. 20. On October 14, 2025, the Court held a premotion conference in which the parties consented to the undersigned's jurisdiction and the Court set a briefing schedule for Defendants’ anticipated motion to dismiss. Minute Entry, dated Oct. 14, 2025; Dkt. No. 21; see also Dkt. No. 23. On December 30, 2025, the parties filed the fully-briefed motion to dismiss. Dkt. Nos. 27, 28, 29.

On July 15, 2026, because Seyam's declaration in support of the motion to dismiss was unsigned, the Court directed Seyam to file the signed declaration by July 20, 2026. Text Order, dated July 15, 2026. Seyam filed the signed declaration in support of Defendants’ motion to dismiss on the same day. Dkt. No. 30.

II. Discussion

A. Legal Standard

“This Court has an independent obligation to determine whether subject matter jurisdiction exists over this case.” Lynch v. Weber-Stephen Prods., LLC, No. 26-CV-1952 (NJC) (ST), 2026 WL 923739, at *1 (E.D.N.Y. Apr. 6, 2026) (citing Joseph v. Leavitt, 465 F.3d 87, 89 (2d Cir. 2006)). “The federal district courts, as courts of limited jurisdiction, possess only such authority as is conferred by an act of Congress.” Elliott v. Jaquez, 777 F. Supp. 3d 136, 146 (E.D.N.Y. 2025) (adopting report and recommendation, and quoting Portillo v. Bharara, 527 F. App'x 48, 49 (2d Cir. 2013)). Because subject matter jurisdiction involves the court's power to hear a case, it can never be forfeited or waived, and can be raised by a party, the court sua sponte, or even for the first time on appeal. Yong Qin Luo v. Mikel, 625 F.3d 772, 775 (2d Cir. 2010) (“Subject matter jurisdiction cannot be waived; thus, a party can, for the first time on appeal, argue that a case does not belong in federal court, even if that party failed to challenge removal.” (citation omitted)); see also Brown v. Allstate Corp., 821 F. Supp. 3d 417, 444 (E.D.N.Y. 2026) (adopting report and recommendation, and holding “subject-matter jurisdiction, because it involves the court's power to hear a case, can never be forfeited or waived” (quoting United States v. Cotton, 535 U.S. 625, 630 (2003))); Beaubrun v. Brennan, No. 23-CV-5201 (AMD) (JMW), 2023 WL 7003714, at *2 (E.D.N.Y. Oct. 24, 2023) (“A lack of subject matter jurisdiction ‘is not waivable and may be raised at any time by a party or by the court sua sponte. If subject matter jurisdiction is lacking, the action must be dismissed.’ ” (citation omitted)). In other words, “[i]f the court determines at any time that it lacks subject matter jurisdiction, it must dismiss the action.” Beaubrun, 2023 WL 7003714, at *2 (quoting Fed. R. Civ. P. 12(h)(3)).

Further, although Defendants move to dismiss under Rule 12(b)(6) according to their notice of motion (Dkt. No. 27), Defendants also cite Rule 12(b)(1) in their memorandum of law. Dkt. No. 27-20 at 14-15. “A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the district court lacks the statutory or constitutional power to adjudicate it.” Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). In resolving a Rule 12(b)(1) motion, the court “may refer to evidence outside the pleadings.” Id. (citation omitted). “[E]videntiary matter may be presented by affidavit or otherwise.” Brown, 821 F. Supp. 3d at 436 (quoting Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986)). “A plaintiff asserting subject matter jurisdiction has the burden of proving by a preponderance of the evidence that it exists.” Makarova, 201 F.3d at 113 (citation omitted).

“ ‘A Rule 12(b)(1) motion challenging subject matter jurisdiction may be either facial,’ i.e. based solely on the allegation of the complaint and exhibits attached to it, ‘or fact-based,’ i.e., based on evidence beyond the pleadings.” Blecher v. Holy See, 631 F. Supp. 3d 163, 167 (S.D.N.Y. 2022) (citation omitted), aff'd, 146 F.4th 206 (2d Cir. 2025). “In resolving a motion to dismiss under Rule 12(b)(1), the district court must take all uncontroverted facts in the complaint (or petition) as true, and draw all reasonable inferences in favor of the party asserting jurisdiction.” Tandon v. Captain's Cove Marina of Bridgeport, Inc., 752 F.3d 239, 243 (2d Cir. 2014) (citation omitted); see also AmGuard Ins. Co. v. Ellis, No. 25-CV-946 (JCH), 2025 WL 3228226, at *2 (D. Conn. Nov. 19, 2025) (“A facial attack merely questions the sufficiency of the pleading. When a defendant raises a facial attack to subject matter jurisdiction, the court takes the allegations in the complaint as true and draws all reasonable inferences in favor of the non-movant.” (citation omitted)), reconsideration denied, 2025 WL 3720425 (D. Conn. Dec. 23, 2025); Brown, 821 F. Supp. 3d at 436 (“In considering a motion to dismiss under Rule 12(b)(1), the ‘[C]ourt must take all facts alleged in the complaint as true and draw all reasonable inferences in favor of [the] plaintiff.’ ” (quoting Makarova, 201 F.3d at 113)).

“However, where a Rule 12(b)(1) motion is fact-based and a defendant proffers evidence outside the pleadings, a plaintiff must either come forward with controverting evidence or rest on the pleadings if the evidence offered by the defendant is immaterial.” Marvin v. Allen, No. 23-CV-5947 (KMK), 2024 WL 4290722, at *3 (S.D.N.Y. Sep. 24, 2024) (citation omitted), reconsideration denied, 2025 WL 1911558 (S.D.N.Y. July 11, 2025). In other words, “when a fact-based challenge to jurisdiction is asserted, favorable inferences are not enough to win the day. For purposes of this motion, which asserts a fact-based challenge to jurisdiction, the Court will draw all reasonable inferences in favor of Plaintiff[ ], but will also examine the evidence outside the pleadings.” King v. Fed. Nat'l Mortg. Ass'n, No. 24-CV-1153 (GRB) (ST), 2025 WL 1707193, at *1 n.2 (E.D.N.Y. Mar. 10, 2025), report and recommendation adopted, Text Order, dated Mar. 25, 2025.

“Federal subject matter jurisdiction is limited and available only when: (1) a ‘federal question’ is presented; or (2) the plaintiff and defendant are of diverse citizenship and the amount in controversy exceeds $75,000.00.” Brown, 821 F. Supp. 3d at 444 (citing 28 U.S.C. §§ 1331, 1332); see also Schabhuttl v. BJ's Membership Club, Inc., No. 23-CV-782 (NGG) (JMW), 2023 WL 3180379, at *1 (E.D.N.Y. May 1, 2023) (same).

In this case, subject matter jurisdiction is allegedly premised only on diversity of citizenship under 28 U.S.C. § 1332, pursuant to Plaintiff's assertion in the Amended Complaint and the fact that no federal claims have been asserted. See Dkt. No. 15 ¶ 2. “Two requirements must be met for diversity jurisdiction: (1) the amount in controversy in the case must exceed $75,000 and (2) the case must be between ‘citizens of different States’ or ‘citizens of a State and citizens or subject of a foreign state,’ such that there is complete diversity of citizenship between every plaintiff and every defendant.” Windward Bora LLC v. Browne, 110 F.4th 120, 125-26 (2d Cir. 2024) (citations omitted).⁴

B. Discussion

Defendants argue that Plaintiff fails to establish diversity of citizenship jurisdiction, focusing solely on the argument that Plaintiff fails to demonstrate the amount in controversy. Dkt. No. 27-20 at 17-20. Pursuant to the Court's independent obligation to determine whether subject matter jurisdiction exists over this case, however, the Court analyzes both the amount in controversy and complete diversity prongs. As demonstrated below, the Amended Complaint fails to establish both the requisite amount in controversy and complete diversity. The Court first addresses Plaintiff's failure to allege complete diversity before turning to the amount in controversy.

1. Complete Diversity

The Amended Complaint fails to allege complete diversity. “With respect to an individual's citizenship, allegations of ‘residence alone [are] insufficient to establish domicile for jurisdictional purposes.’ ” Lynch, 2026 WL 923739, at *2 (first citing Van Buskirk v. United Grp. of Cos., Inc., 935 F.3d 49, 53 (2d Cir. 2019); and then citing RainMakers Partners LLC v. NewSpring Cap., LLC, No. 23-899, 2024 WL 1846321, at *2 n.1 (2d Cir. Apr. 29, 2024) (“[A] complaint that alleges that the plaintiff and defendant are merely residents of different states has failed adequately to allege the existence of diversity jurisdiction.”)). To determine domicile, courts consider numerous factors:

current residence; voting registration; driver's license and automobile registration; location of brokerage and bank accounts; membership in fraternal organizations, churches, and other associations; places of employment or business; ․ payment of taxes; ․ whether a person owns or rents his place of residence; the nature of the residence (i.e., how permanent the living arrangement appears); ․ and the location of a person's physician, lawyer, accountant, dentist, stockbroker, etc.

Lynch, 2026 WL 923739, at *2 (first citing Lever v. Lyons, No. 16-CV-5130 (MKB) (SJB), 2021 WL 302648, at *7 (E.D.N.Y. Jan. 28, 2021); and then citing Lawrence Moskowitz CLU Ltd. v. ALP, Inc., 830 F. App'x 50, 51 (2d Cir. 2020) (“[T]he determination of domicile considers factors such as voting, taxes, property, bank accounts, places of business or employment.”)).

Here, the Amended Complaint alleges that Plaintiff “resides in North Carolina,” and Seyam and Salama are “resident[s] of New York.” Dkt. No. 15 ¶¶ 5-8. But besides pleading those parties’ residences, the Amended Complaint does not plead any factors regarding domicile, such as voting, taxes, property, bank accounts, places of business, or employment, and thus, fails to sufficiently allege their citizenship. Dkt. No. 15 ¶¶ 5-8; see also RainMakers Partners, 2024 WL 1846321, at *2 n.1 (“[A] complaint that alleges that the plaintiff and defendant are merely residents of different states has failed adequately to allege the existence of diversity jurisdiction.”).

As to Advanced Taxation, the Amended Complaint merely alleges, without more, that Advanced Taxation “is an accounting firm with a principal place of business located in Queens, New York.” Dkt. No. 15 ¶ 6. Plaintiff “must identify both the LLC's members and their citizenship” to invoke this Court's diversity jurisdiction. See 136-61 Roosevelt LLC v. Starbucks Corp., No. 21-cv-3560 (BMC), 2021 WL 2779287, at *1 (E.D.N.Y. July 2, 2021) (“ ‘For diversity purposes, LLCs have the imputed citizenship of each of their members.’ Thus, if a party to a diversity action is an LLC, the party seeking to invoke the court's diversity jurisdiction must identify both the LLC's members and their citizenship.” (citations omitted)).

Here, Plaintiff failed to identify the requisite LLC's members to invoke the Court's diversity jurisdiction. Dkt. No. 15 ¶ 6.

Therefore, Plaintiff failed to allege complete diversity, which provides a basis to dismiss for lack of subject matter jurisdiction. As shown below, however, granting leave to amend would be futile because Plaintiff cannot cure the lack of a sufficient amount in controversy.

2. Amount in Controversy

Although Defendants’ brief is not clear as to whether it is proceeding as a facial or fact-based challenge to subject matter jurisdiction, it appears that Defendants initiates a facial challenge, arguing that “[t]he amended complaint fails” to sufficiently establish the amount in controversy, but Defendants also cite to Seyam's declaration for the merits-based argument that “[t]he funds were never in (or remained in) defendants’ possession.” Dkt. No. 27-20 at 17-18. The parties essentially agree that the actual compensatory damages are $3,128.00, the total amount of benefits issued to Plaintiff that were deposited in Salama's account (Dkt. No. 15 ¶¶ 11-12), except that Plaintiff argues that the availability of unspecified punitive damages suffices to close the gap between the $3,128.00 in compensatory damages and the $75,000.00 amount in controversy requirement. See Dkt. No. 27-20 at 17-19; Dkt. No. 28-4 at 15; Dkt. No. 29 at 10-11. As set forth below, Plaintiff's argument as to unspecified punitive damages lacks merit.⁵

“Ordinarily, the amount in controversy is measured as of the time a complaint is filed, and it is established by the face of the complaint and the dollar-amount actually claimed.” Brown, 821 F. Supp. 3d at 444 (citation omitted). “[A] plaintiff invoking federal jurisdiction must demonstrate a ‘reasonable probability’ that the amount-in-controversy requirement is satisfied.” Agoliati v. Block 865 Lot 300 LLC, No. 22-51, 2023 WL 405769, at *2 (2d Cir. Jan. 26, 2023) (quoting Pyskaty v. Wide World of Cars, LLC, 856 F.3d 216, 223 (2d Cir. 2017)); see also Lynch, 2026 WL 923739, at *2 (same); Z-Axis Tech Sols., Inc. v. Richmond Cap. Grp., LLC, No. 17-CV-3983 (GBD), 2018 WL 1088008, at *3 (S.D.N.Y. Feb. 14, 2018) (same). The Second Circuit has “recognize[d] a rebuttable presumption that the face of the complaint is a good faith representation of the actual amount in controversy.” Pyskaty, 856 F.3d at 223 (citation omitted); see also Lynch, 2026 WL 923739, at *2 (same); Z-Axis Tech Sols., 2018 WL 1088008, at *3 (same).

Nonetheless, “[a] defendant may rebut that presumption by demonstrating ‘to a legal certainty that the plaintiff could not recover the amount alleged or that the damages alleged were feigned to satisfy jurisdictional minimums.’ ” Psykaty, 856 F.3d at 223 (citation omitted); see also Z-Axis Tech Sols, 2018 WL 1088008, at *3 (same). “[W]here the pleadings are inconclusive of whether the amount in controversy for diversity jurisdiction has been established, ‘the courts may look to documents outside the pleadings to other evidence in the record to determine the amount in controversy.’ ” Brown, 821 F. Supp. 3d at 444 (first quoting Ma v. United Rentals (N. Am.), Inc., 678 F. Supp. 3d 412, 415 (S.D.N.Y. 2023); and then quoting Yong Qin Luo, 625 F.3d at 775). “Where the damages sought are uncertain, the doubt should be resolved in favor of the plaintiff's pleadings.” Z-Axis Tech Sols., 2018 WL 1088008, at *3 (citation omitted).

“A good faith claim for punitive damages can be considered in determining the relevant amount in controversy.” Id. (citations omitted). “However, claims for punitive damages are reviewed with greater scrutiny than claims for actual damages when punitive damages serve to satisfy the jurisdictional requirement.” Id. (citation omitted). “Notably, ‘[a] trial court is not compelled to accept a claim for punitive damages made for the purposes of conferring jurisdiction.’ ” Id. (citation omitted). “When the asserted amount in controversy is based on a cause of action created by state law, ‘federal courts must ․ look to state law to determine the nature and extent of the right to be enforced.’ ” Id. (citation omitted).

Here, as previously noted, Plaintiff does not explicitly allege in the Amended Complaint that the amount in controversy is greater than $75,000.00; rather, Plaintiff alleges that the benefits he was entitled to total $3,128.00 and that he seeks “monetary damages, in an amount to be determined by a jury at trial” and unspecified “punitive damages.” See Dkt. No. 15 ¶ 11, at 7; see also Dkt. No. 28-4 at 15 (“Defendants argue that this Court does not subject matter jurisdiction but do so on the basis of only one weak proposition: that punitive damages will be unavailable to Plaintiff as a means of compensatory relief.”).

Punitive damages, however, are unavailable for breach of contract and fraud, the two claims asserted in the Amended Complaint. Id. ¶¶ 18-33. It is well settled that “punitive damages ‘are generally not available for breach of contract.’ ” Cummings v. Premier Rehab Keller, P.L.L.C., 596 U.S. 212, 221 (2022) (citation omitted); see also Rocanova v. Equitable Life Assur. Soc. of U.S., 634 N.E.2d 940, 943 (N.Y. 1994) (“Punitive damages are not recoverable for an ordinary breach of contract as their purpose is not to remedy private wrongs but to vindicate public rights”). Nonetheless, under New York law, “[a] narrow exception to the rule barring punitive damages in a breach of contract action applies where egregious, independently tortious conduct is alleged and, in addition, public rights are implicated.” Int'l Christian Broad., Inc. v. Koper, 928 F. Supp. 2d 559, 562 (E.D.N.Y. 2013) (adopting report and recommendation). As the New York Court of Appeals has held, “a private party seeking to recover punitive damages must not only demonstrate egregious tortious conduct by which he or she was aggrieved, but also that such conduct was part of a pattern of similar conduct directed at the public generally.” Id. (quoting Rocanova 634 N.E.2d at 944 (emphasis added)); see also Z-Axis Tech Sols., 2018 WL 1088008, at *3 n.5 (“[T]he ‘New York Court of Appeals in Rocanova clearly explained that fraud arising from a contractual relationship must be directed at the public generally for punitive damages to be awarded’ ” (first citing Baxter Diagnostics, Inc. v. Novatek Med., Inc., No. 94-CV-5220 (AJP), 1998 WL 665138, at *2 (S.D.N.Y. Sep. 25, 1998); and then citing Rocanova, 634 N.E.2d at 944)).

Similarly, “[u]nder New York law, ‘punitive damages are not available in an ordinary fraud case.’ ” Z-Axis Tech Sols., 2018 WL 1088008, at *3 (citation omitted). “Punitive damages may only be recovered in a fraud action where the fraud is aimed at the public generally, is gross, and involves high moral culpability.” Id. (citation omitted). Further, “[t]he misconduct must be egregious and characterized as gross and morally reprehensible, or involve such wanton dishonesty as to imply a criminal indifference to civil obligations.” Id. (internal quotation marks and citation omitted). “In articulating the public aim requirement, New York courts have invoked a distinction between a ‘gross and wanton fraud upon the public’ on the one hand and ‘an isolated transaction incident to an otherwise legitimate business’ on the other.” Id. at *4 (quoting Ball v. Cook, No. 11-CV-5926, 2012 WL 4841735, at *12 (S.D.N.Y. Oct. 9, 2012) (Sullivan, J.)).

Z-Axis Tech Solutions illustrates allegations that are insufficient to constitute conduct aimed at the public generally required for punitive damages in breach of contract and fraud claims under New York law. There, the plaintiffs alleged that the defendant “misrepresented that it would be providing funding to [plaintiff] Z-Axis as a direct funder in a single transaction” regarding a short-term loan. Id. at *2. The plaintiffs, however, also alleged “that the deal was completed through two separate funders, and ․ ‘[approximately] $60,000 was wrongly and deceptively misappropriated’ by [the defendant] as ‘brokerage fees.’ ” Id. Thus, the court summarized,

[a]t most, then, [p]laintiffs’ claims against [the defendant] are for $59,999. Without more, [p]laintiffs’ cannot meet the $75,000 amount in controversy requirement. Plaintiffs attempt to make up the difference by asserting a claim for punitive damages in an unspecified amount. In this effort, they fail.

Id. (footnotes omitted). The court held that the plaintiffs failed to prove any conduct “aimed at the public” because “there is no indication that [the defendant] is running an illegitimate business, making the facts here more akin to an isolated private transaction between businesses, not one that is affecting the public at large.” Id. at *4. Further, the court held that the “alleged attempt to ‘lull [p]laintiffs into acquiescence by promising over and over again that the $60,000 would be refunded’ as evidence of willful conduct,” “amount to no more than ordinary fraud and there is nothing ‘willful and wanton, outrageously immoral, or criminal as to warrant an award of punitive damages.’ ” Id. at *3.

Similarly, International Christian Broadcasting is further illustrative of allegations that are insufficient to constitute conduct aimed at the public generally. That case involved a plaintiff who alleged that one of the defendants made statements about a false injury that he sustained while serving in the military that caused the plaintiff's assignor to loan $22,000.00 to the defendants. 928 F. Supp. 2d at 560-61. The court noted that “Plaintiff concedes, as it must, that the $22,000 sought to be collected for non-payment of the Loan does not meet the jurisdictional minimum amount in controversy to establish federal jurisdiction.” Id. at 563. The plaintiff argued that “the $100,000 sought in punitive damages satisfies the jurisdictional requirement.” Id. But the court disagreed, and held that “[s]uch representations, even if false, are private in nature.” Id. The court concluded, “[u]ndoubtedly, misrepresenting one's military service is wrong and, indeed, insulting to members of the military,” but “such conduct rises neither to the level of tortious egregious conduct, nor public harm necessary, to state a claim for punitive damages.” Id.

For even stronger reasons than in Z-Axis Tech Solutions and International Christian Broadcasting, Plaintiff here fails to make up the difference by asserting an unspecified punitive damages claim. Plaintiff's compensatory damages claim for $3,128.00 (Dkt. No. 15 ¶ 11) is an order of magnitude less than the approximate $60,000 damages in Z-Axis Tech Solutions and the $22,000 in International Christian Broadcasting.

Moreover, Plaintiff fails to establish any conduct “aimed at the public” because the Amended Complaint is devoid of any facts as to other victims of the alleged fraud, making the facts “more akin to an isolated private transaction, ․ not one that is affecting the public at large” (Z-Axis Tech Sols., 2018 WL 1088008, at *4), and “private in nature” (Int'l Christian Broad., 928 F. Supp. 2d at 563). See generally Dkt. No. 15. Last, the allegations that Defendants caused the deposit of Plaintiff's unemployment insurance benefits into a bank account not owned by Plaintiff in June 2020 and then “tried to cover up their misconduct by means of the Cover-Up Letter” (id. ¶¶ 9-17), if true, amount to “no more than ordinary fraud and there is nothing ‘willful and wanton, outrageously immoral, or criminal as to warrant an award of punitive damages.’ ” See Z-Axis Tech Sols., 2018 WL 1088008, at *3 (holding that the “alleged attempt to ‘lull [p]laintiffs into acquiescence by promising over and over again that the $60,000 would be refunded’ as evidence of willful conduct,” “amount to no more than ordinary fraud”); Int'l Christian Broad., 928 F. Supp. 2d at 563 (holding that the misrepresentations about one's military career to induce the plaintiff's assignor to issue a $22,000 loan are “private in nature,” and “[l]ying to one's grandmother to obtain a loan does not amount to tortious behavior aimed at the public in general that is sufficient to state a claim for punitive damages in the context of a breach of contract action,” even if such conduct is “insulting to members of the military”). Again, Plaintiff also fails to establish a pattern of conduct required to obtain punitive damages on breach of contract claims. See Int'l Christian Broad., 928 F. Supp. 2d at 562 (holding that to obtain punitive damages for a breach of contract, the plaintiff must demonstrate “conduct [that] was part of a pattern of similar conduct directed at the public generally” (quoting Rocanova 634 N.E.2d at 944 (emphasis added)). Therefore, Plaintiff has not demonstrated that he is able to recover almost $72,000.00 in punitive damages—or any punitive damages at all—in this action for fraud and breach of contract.

Accordingly, because the amount in controversy here is, at most, $3,128.00, Plaintiff failed to meet the amount in controversy requirement for diversity of citizenship jurisdiction.

C. Futility of Amendment

“[I]t is well-understood that a plaintiff may cure defective jurisdictional allegations, unlike defective jurisdiction itself, through amended pleadings.” Fund Liquidation Holdings LLC v. Bank of Am. Corp., 991 F.3d 370, 388-89 (2d Cir. 2021) (citations omitted). Nonetheless, leave to amend should be denied where amendment would be futile. Cortlandt St. Recovery Corp. v. Aliberti, No. 12-CV-8686 (JPO), 2014 WL 6907548, at *1 (S.D.N.Y. Dec. 9, 2014). “Amendment is futile where ․ the Court lacks subject matter jurisdiction over the case as pleaded in the proposed amendment.” Id. (citing Latino Quimica–Amtex S.A. v. Akzo Nobel Chemicals B.V., No. 03-CV-10312 (HB) (DF), 2005 WL 2207017, at *4 (S.D.N.Y. Sep. 8, 2005) (“Where a court would lack subject matter jurisdiction over the case as pleaded in the proposed amendment, the court may deny leave to amend on the ground of futility.” (citation omitted))).

The Court has discussed above why punitive damages are not warranted in this action alleging fraud and breach of contract. Even assuming that punitive damages are available, however, amendment would be futile because the punitive damages award could not fill the large gap between $3,128.00 and $75,000.00.

“The Supreme Court has ‘concluded that [a punitive damage] award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety.’ ” Thomas v. iStar Fin., Inc., 652 F.3d 141, 149 (2d Cir. 2011) (citing State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003)); see also Webber v. Dash, 607 F. Supp. 3d 407, 418 n.9 (S.D.N.Y. 2022) (quoting Thomas, 652 F.3d at 149).⁶ As Defendants persuasively argue,

[h]ere, actual damages are $3,128. Even at an extraordinarily generous 10:1 ratio, which is far beyond what New York courts typically award, punitive damages would be $31,280, bringing total damages to $34,408. That is still less than half of the $75,000 jurisdictional threshold. To reach $75,000, Plaintiff would need punitive damages at a ratio of approximately 23:1.

Dkt. No. 29 at 10.

In sum, Defendants have demonstrated “to a legal certainty that the plaintiff could not recover the amount alleged,” Psykaty, 856 F.3d at 223, because, even if Plaintiff could recover punitive damages here, he is unable to recover punitive damages at a ratio of 23:1, which is the only way in which punitive damages would help him reach the minimum amount in controversy requirement. Therefore, the Court lacks subject matter jurisdiction, and leave to amend would be futile.

D. Defendants’ 12(b)(6) Motion

Because the Court dismisses this action for lack of subject matter jurisdiction, it does not reach the merits of Defendants’ Rule 12(b)(6) motion. The Second Circuit has held that “when a case is dismissed for lack of federal subject matter jurisdiction, ‘Article III deprives federal courts of the power to dismiss [the] case with prejudice.’ ” Katz v. Donna Karan Co., L.L.C., 872 F.3d 114, 121 (2d Cir. 2017). Accordingly, a case dismissed under Rule 12(b)(1) “must be dismissed without prejudice.” Id.

“When a party moves for dismissal under Rule 12(b)(1) and on other grounds, courts consider the Rule 12(b)(1) challenge first.” Prime Contractors, 754 F. Supp. 3d at 297-98 (E.D.N.Y. 2024) (quoting Whyte v. Bayview Loan Servicing, LLC, No. 21-CV-3301 (PKC) (LB), 2022 WL 4484664, at *3 (E.D.N.Y. Sep. 27, 2022)). “This is because if a court determines that it lacks subject-matter jurisdiction, then the defendant's ‘other defenses and objections ․ do not need to be determined.’ ” Id. (first quoting Whyte, 2022 WL 4484664, at *3; and then quoting Daly v. Citigroup Inc., 939 F.3d 415, 426 (2d Cir. 2019)); see also Z-Axis Tech Sols., 2018 WL 1088008, at *1 n.1 (“A court faced with a motion to dismiss pursuant to both Rules 12(b)(1) and 12(b)(6) must decide the jurisdictional question first because a disposition of a Rule 12(b)(6) motion is a decision on the merits and, therefore, an exercise of jurisdiction.” (citation omitted)). Thus, because the Court dismisses this action for lack of subject matter jurisdiction, the Court denies without prejudice Defendants’ motion to dismiss for failure to state a claim.

E. Defendants’ Motion for Sanctions

Defendants requests sanctions against Plaintiff's counsel under Rule 11, 28 U.S.C. § 1927, and the Court's inherent authority, because “counsel filed this action in federal court without a good faith basis for believing subject matter jurisdiction existed,” and counsel's continued pursuit of “meritless claims.” Dkt. No. 27-20 at 32-44. Courts regularly dismiss actions for lack of subject matter jurisdiction without imposing sanctions. See, e.g., Elliott, 777 F. Supp. 3d at 152; Beaubrun, 2023 WL 7003714, at *5; Brown, 821 F. Supp. 3d at 444. There is no evidence that Plaintiff's counsel filed this action knowing that the Court lacked subject matter jurisdiction. While ultimately unmeritorious, Plaintiff's counsel responded to Defendants’ arguments regarding subject matter jurisdiction. Dkt. No. 28-4 at 15. Indeed, Plaintiff's counsel's willingness to withdraw potentially meritless claims from the original Complaint in the Amended Complaint (Dkt. No. 15) undercuts Defendants’ arguments that counsel filed this action in federal court without a good faith basis for believing subject matter jurisdiction existed, and counsel continued to pursue meritless claims. Dkt. No. 27-20 at 32-44.

III. Conclusion

For the foregoing reasons, the Court dismisses this action without prejudice for lack of subject matter jurisdiction, and denies without prejudice Defendants’ motion to dismiss for failure to state a claim and Defendants’ motion for sanctions. The Clerk of the Court shall enter final judgment in a separate document as required by Rule 58 of the Federal Rules of Civil Procedure and close this case.

SO ORDERED.

FOOTNOTES

1.   The parties consented to the undersigned's jurisdiction on October 14, 2025. See Dkt. No. 23.

2.   Page citations are to the ECF-stamped pages, unless otherwise noted.

3.   Plaintiff also alleged respondeat superior in connection with his claims against Seyam as an “employee and/or principal” of Advanced Taxation. Dkt. No. 15 ¶¶ 29-33.

4.   As discussed below, because the Court lacks subject matter jurisdiction, it does not reach the merits of Defendants’ Rule 12(b)(6) motion. Prime Contractors, Inc. v. APS Contractors, Inc., 754 F. Supp. 3d 289, 297-98 (E.D.N.Y. 2024) (“[I]f a court determines that it lacks subject-matter jurisdiction, then the defendant's ‘other defenses and objections ․ do not need to be determined.’ ” (citation omitted)). Therefore, the Court needs not set forth the standard under Rule 12(b)(6).

5.   Even assuming arguendo, that Defendants advance a fact-based challenge with its citation to matters outside the pleadings, Plaintiff does not come forward with any controverting evidence, but rather rests on the pleadings, by arguing that “punitive damages are available for Plaintiff to recover, and defendants’ arguments fails.” Dkt. No. 28-4. Therefore, for the same reasons, Plaintiff fails to rebut Defendants’ fact-based challenge to subject matter jurisdiction. In other words, regardless of whether it is a facial attack or a fact-based attack, Plaintiff fails to establish the amount in controversy.

6.   This 4:1 ratio is the “outer constitutional limit.” Webber, 607 F. Supp. 3d at 416 (citation omitted). Of course, if the Court were called upon to review whether an actual punitive damages award is excessive, the Court must apply “the state law standard for the appropriateness of remittitur.” Id. at 416-17 (citation omitted). New York's standard for remittitur is governed by New York Civil Practice Laws and Rules (“CPLR”) § 5501(c). Webber, 607 F. Supp. 3d at 417. The standard for remittitur under CPLR § 5501(c) “requires closer review” and is “more rigorous” when compared to the federal standard. Gasperini v. Ctr. for Hums., Inc., 518 U.S. 415, 429 (1996) (“New York's Legislature codified in § 5501(c) a new standard, one that requires closer court review than the common-law ‘shock the conscience’ test. More rigorous comparative evaluations attend application of § 5501(c)’s ‘deviates materially’ standard.” (citation omitted)).

JOSEPH A. MARUTOLLO United States Magistrate Judge